Clinton Opposes Efforts for Budget Amendment : Economy: President says forced balance could spark gridlock and recession. He instead sets up panel to study growth of entitlement spending.

President Clinton denounced a proposed balanced budget amendment to the Constitution, warning lawmakers Friday that a requirement to balance federal revenues and spending immediately could harm the economy and paralyze the government.

At the same time, to protect himself against charges of being unconcerned about the deficit, Clinton issued an executive order setting up a bipartisan commission to study the problems posed by entitlement spending. The panel will review the rapid growth of spending programs such as Medicare, Medicaid, pensions and veterans benefits that have become the principal forces driving up federal spending.

Clinton made clear his opposition to the proposed amendment in a letter to congressional leaders in which he called the idea “bad economics.”

“While I am deeply committed to bringing down our nation’s deficit, this proposed balanced budget amendment would not serve that end,” Clinton wrote. “It would promote political gridlock and would endanger our economic recovery.”

White House officials are aware that the balanced budget amendment, which Presidents George Bush and Ronald Reagan both supported, enjoys substantial public backing. They delayed releasing the letter until late Friday evening, after the network newscast deadlines. As they predicted, Clinton’s stand drew quick partisan fire.

“We believe a balanced budget amendment is needed, and we’re sorry to see that he’s going to be opposing an amendment to require a balanced budget,” said House Republican Whip Newt Gingrich. In addition to most Republicans, a substantial number of Democrats and former presidential candidate Ross Perot support the amendment, which the Senate is expected to debate later this month. Sen. Paul Simon (D-Ill.) is the amendment’s chief Senate sponsor.

Supporters of the amendment argue that it is the only way to force Congress and the President to actually bring the government’s books into balance after years of talk.

Opponents say that the amendment would merely worsen gridlock and invite litigation, and recommended that the government balance the budget through progressive belt tightening over a number of years.

If the amendment receives the necessary two-thirds vote in the Senate, it is almost certain to pass the House, where many freshman legislators pledged support for it during their campaigns. After that, it still would require ratification by three-quarters of the states before it would become law.

Although Clinton opposed the balanced budget amendment during last year’s presidential campaign, some of his political aides were wary of declaring opposition to the amendment now. But Clinton’s economic advisers strongly pressed him to oppose the amendment, fearing that if it passed, it could paralyze the government and make Clinton’s health care reform package almost impossible to adopt.

Government and private economists generally agree that a quick move to actually bring the government’s books into balance--either by cutting spending or by raising taxes--would knock the economy back into deep recession. Already, this year’s budget package, which would trim the deficit but not eliminate it, has noticeably reduced economic growth, economists say.

Under the amendment, if the budget was not balanced, approval of almost any legislation would require support by more than a majority of the House and Senate--a requirement that Clinton aides fear would allow small groups of legislators to hold most bills hostage.

Clinton’s proposed commission would be headed by two senators, Bob Kerrey (D-Neb.) and John C. Danforth (R-Mo.). Kerrey has long been an advocate of large-scale reform of the government’s entitlement programs. Danforth, who plans to retire next year, is a widely respected moderate.

Although virtually everyone who has studied the budget agrees that entitlements are now the main cause of the deficit, the programs are difficult to cut because they provide benefits to millions of middle-class families. Supporters of the commission idea hope that a bipartisan approach would provide legislators the political cover to cut popular programs.